Nokia’s (NYSE: NOK) turnaround story ended. The company reported third-quarter earnings that showed problems from consolidation efforts. It is also facing pressure from China-based companies. With no revenue growth this year or next, Nokia is “dead money.”
Nokia forecast revenues falling by 4-5% this year, due to its weak Networks division. In 2018, revenue could fall by between 2 – 5%. One bright spot that could attract income investors is Nokia’s proposal to raised its dividend by EUR $0.02 a share.
The 37% revenue growth from the Nokia Technologies division is another positive data point in the results. But the unit only accounts for around 10% of total revenue. Nokia needs its Networks, Broadband Networks, IP Networks, and Global Services units all growing revenue. In Q3, all of those units underperformed.
Though NOK stock is a disappointment, the company is doing fine. It is just not growing. Value investors need to ignore the emotional hardship of holding Nokia while enjoying the dividend increase and higher Q/Q net income. The company has a healthy balance sheet. As it consolidates its Alcatel-Lucent unit, cutting costs and improving efficiency, these steps will strengthen the balance sheet and the business.
Disclosure: Author owns shares of Nokia.
